Canadian economists propose fund to combat housing vacancy

A group of Canadian economists are calling on the provincial government of British Columbia in western Canada to address housing affordability with a tax targeting property owners without ties to the local economy.

A total of 10 professors at University of British Columbia and Simon Fraser University, both located in Vancouver, recommended that the provincial government create a B.C. Housing Affordability Fund (BCHAF). Local residents would receive money raised through an annual surcharge on owners of vacant properties and owners who are not Canadian taxpayers.

"The goal is to support those living in parts of the province that have seen skyrocketing real estate prices, while also making our local markets less attractive to investors who wish to avoid taxation or park cash," one of the professors drafting the proposal, Thomas Davidoff, said in a statement on Monday.

The economists proposed funding the BCHAF with an annual 1.5-percent surcharge targeting owners of vacant properties or those with limited participation in the Canadian economy. For example, the owner of a vacant home worth 10 million dollars (6.8 million U.S. dollars) would face an annual BCHAF contribution of 150,000 dollars (102,000 U.S. dollars).

Most homeowners and landlords would be exempt from the surcharge. As an incentive to move unoccupied suites into the rental market, the policy also allows for owners to receive tax exemptions on rental income they receive from non-family members reported to the Canada Revenue Agency.

The economists also suggested a localized approach that allows each municipality within the province to choose whether to implement the BCHAF. Funds raised from absentee owners within a particular jurisdiction would go directly to all taxpayers who declare residency within the same locale -- including property owners and renters -- in the form of equal lump sum payments.

Based solely on the current vacancy data, the economists estimate the BCHAF would raise a minimum of 90 million dollars (61 million U.S. dollars) per year in Vancouver, the biggest city of the province.

"We are certain the sum would actually be much higher as current systems for data collection don't provide a full picture of vacancy rates," said Davidoff. "An added bonus of the BCHAF reporting process is that it will help us gain a much more accurate picture of the problems of homes left vacant and property owners who do not or have not paid their share of Canadian taxes." Endi